Credit Suisse Transforms Under CEO Brady Dougan

Credit Suisse CEO Brady Dougan talks to the WSJ's Francesco Guerrera about bankers' pay, new rules and the company's transformation since the crisis.

This transcript has been automatically generated and may not be 100% accurate.

I ... I wish you weed out Brady Dougan ... chief executive of Credit Suisse ... three things to be with us ... it is my pleasure thank you ... let's start from and the regulatory regime ... among the ... banks that you ... and other Swiss banks have had it ... tougher than others because of the tougher regime how you assess how you've done so far and where others are ... we know as a January first were fully under Basel three from a cap on liquidity point EU and UN CEO took a lot of work to get to a fully compliant basis ... we think the first quarter shows we got a business model that actually is performing very well under those circumstances and ... it wasn't too long ago that there was a pretty big debate about whether or not banks going to be able to serve their customers well and make good returns under Basel three and I think our ... performance in the first quarter shows that we were able to do that and now here we believe we got ... the business model in that place on that front ... um and we still do believe that there is a lot of the industry's Opel was a lot of work to do and so they're still aam ... instill in other countries where the ... actual Basel three applications been pushed out a lot they're still lot of work that the that the industry has to do so we feel like ... from this point on with the stable sustainable business model and one that hopefully will perform well on you know ... so does all this love the doom and gloom about the effects of that extra regulation Basel three and other things ... on banks' business model ... you confident that ... you another scan the book survive and thrive in and of course Basel three M post regulatory I changes the environment ... we I think if you look if you look at our first-quarter specifically and we had a sixteen percent return on capital overall ... we had twenty three percent return on capital investment bank and it wasn't too long ago that most analysts were saying ... that some banks might make seven or eight percent under Basel three is can be very tough for them to make decent returns ... in the other thing is we got our customer market shares are strong with not strengthening across pretty much ... all of our businesses so I think our view is that ... would enable make a successful transition and under this business model we can serve our clients' well ... provide good returns for shareowners and have a very sustainable business and I think that's actually a ... new army would be can work ... so that you are ... you a different from any of the article that is because because the two things one is ... of the Swiss regulators demanded higher capital requirements before everybody else the complied for a body else ... and you have the cute wealth management business that helps in a situation where religious affecting penalize risk it misses it so ... how much of a Ally R us how much is that reputable in other places ... why think you're right we deftly have I think of is a smile that gives us a real advantage in having ... almost half of our capital and our private banking wealth Manson is is a big advantage and ... that's a great business and one that I think is going to continue to be a great going forward we got a very strong franchise that so that's ... definitely an advantage um ... I think it has allowed this then also to transform the investment bank in a way that's ... also very integrated with the private bank in and feeds a lot off of our ... relationships in our business and that's a very important part the integrated Bank is something that we think is is very important ... um so I think that is certainly an advantage in the business model that we have ... um and you know clearly that may not be a you know the smaller body else can pursue but from our point of view ... to say you know we have an early requirement to ... do actually transform the business ... um we've done that would probably have some benefits in terms of some parts the business model but Tom is working ... a new single so I went to see so Invesco's forte aren't sustainable bills into one small scene going for through the cycle ... well you know we said our overall target is fifteen percent return capital for the group and also so we'd like to get to ... aam a fifteen percent ... Basel three capital return on investment bank over time ... naughty she first quarter's the tip of the van last few years a pre good quarter ... so aam you know will see how the rest of the year of actually plays out but we do feel ... um that you know our longer term goal the fifty percent overall return on capital ... in a fifty percent Basel three returning Kathleen Vasant bank is achievable home so ... she that'll be offered to be ups and downs as quarter to quarter but overall we think that something that we can she ... so ... I ... looked so good about the transformation of the business ... on the new leadership I he he took over ... a six years ago so it says be not awhile and ... hard to be driven by regulators but how would you characterize the changes they you've introduced in the bank and how does the Bank of differing now and then when you take them ... to call ... well we pretty much early on in the process we determined it was one of the business was more client focus ... was more cap efficient ... aam you really going in the crisis that was our strategy ... that helped us alot during the crisis and we actually I think it recently well through the crisis in terms of ... how a ministry that the law that was because of our strategic approach which was we wanted to have a quiet focus ... capital efficient business aam even precrisis and and so a lot of that has governed know how we have transform the business so we exited ... our proprietary trading business is very early on we exited lover longer dated ... structured read this business isn't all that is actually help quite a bit because regulations have basically ... gone exactly in that direction so that's actually been very helpful ... I think we have now we have a much more capital efficient mom we have a much lower risk model ... we have a business is much more balance between our private banking arm Besson banking business and we gotta businesses working much more closely together than we thought we did five or six years ago so ... then um it's been actually a iam it's been a very interesting jury's been challenging from a lot of points of view but I think they've actually have made ... you a pretty big transformation that this is Mama with her ... Peabody and ... exiting a lot of the risk in this is the seals are giving up on the ... peaks ... in in bull markets are you ... concerned if the market gets better if interest rates are I see new people ... and customers are getting more appetite for risk you'll miss out on some of those things because you now ... I'm much more stable and less risky ... well I think were were geared to more I think you're right that clearly we are not because we do have a lower risk profile ... or not is geared to changes in asset prices in markets and so that's something that ... they were less sensitive to ... thorax the still aam you know are um ... able to benefit from increases in customer activity and so the centrists is if you look at our credit banking wealth management business ... it's been a pretty tough period with low interest rates and probably relatively less act clients ... that's why more we believe actually as the environment improves over time ... customers get a little bit more opportunistic ... and if rates start to move up at some point ... one might happen and if that happens ... that will benefit the business tremendously so we see a lot of upside from the US we still think there's ... the sexy lot of upside in the business but ... our belief is that we have hopefully learned a lot of those valleys on in the performance of the business by making a much less risky business ... and your contention is ... consists only be made you guys ... moved in front of the readily all the whole US among the flows to change Mrs model strategy ... and now you should be reaping the benefit of its not keeping the market is the view of the baskets ... of benefits and ID seen the others being banned penalize because they're behind you ... well I would say I think gum ... I think for the past year year and half Despite morbid disadvantages to half the ... move on these regulatory issues then and when someone a vote on a level playing field ... um I think we do believe that now or in a position where ... it's going to start to be more of an advantage for tick leaves the rest the world does have to go ... into the Basel three Capper regulations about what should be of benefit fraudsters will have this ... sustainable business model going forward ... aam and will be able to serve our clients on a consistent basis so ... I think our belief is that that will become more more apparent to the market and therefore be reflected in share price but ... don't want to see how things develop it still ... in the environment is still one it's a very ... it's not very transparent spark for people to understand the different opinions ... about where these things are going to our belief is that it should be an increasing advantage forests ... and that'll play out analysts to be reflected in share prices will ... introduce the new league is suffering from a aam Invesco's dislike for banks is an asset class in India the other banks are inherently ... risky or an slowed ... will love when it's into returns an uncertain about the DVD is suffering from a tough time with same brush ... well I think there's ... a sense that's a disadvantage but also an advantage mean as you say there's certainly then I think ... and an aversion to investing in the sector because people didn't know where regulation was going nowhere was can end up with what was in barman and boring set for a ... saucy one the arguments that we make is if we are a business model that's gone to a sustained sustainable place in the new regulatory environment ... aam now ... then are ... our suggestion is that as an investor that's a pretty good business model with us and as you can have transparency around the return to center so ... why do you think they're probably still are there still are probably a number of investors who would just say you know that's a sector that ... you know I'm not comfortable investing and there may be others who say gee you know ... maybe is time tax to move into that and if they do perhaps the look of our business model and say ... that's one with a lot more transparency on returns and ... and the value of that so that's one that were more interested in investing and so ... again we'll see all the plays out but I think that since it's could be an advantage from that point ... when eating the biggest risk to this model is at the moment ... well I think we've gotten through a lot of the um issues Avison the regulatory side we've we've said we're pretty were were pretty much done in terms of all the Basel which isn't Sentra ... um there are some here there are obviously continuing issues out there you've got a number of the sort of ... um what I call more legislative ... issues thought fraying and Vickers and Lincoln in ... which are more structural a man she as the asthe headquarters is in Switzerland they don't affect this is much that they have some ancillary um ... um ... effects on the business ... so I think that she for real it's where we were pretty well settled ... is probably more just a question of market conditions and you know obviously we do believe that we got on ... scene and in the diarist mom but we still will do better if there's more volume at long on the markets and a ... less well on the other side so ... um that's probably the biggest risk but to again we think that something that you know puts ascendant position were we have very consistent earnings at five one final question on deep in the bank is peso seen the spotlight not least in ... Switzerland um ... how would you ... respond to the critique service a no bank is there ... overpaid old ppg is not related to performance and issue the um ... motivational around ... well I think one of things that we do believe is that due to ... the share between shareholders and employees in terms of the value creating the business has to be um relatively equal ... and clearly over the past few years for various reasons that's probably been out of whack so ... our view is that we do need to bring that into balance and I think one of the ... good things is we think with our business model will be able to create the returns ... that do allow us to get the returns to shareholders but also allows the pair employees competitively so ... we think that's a very important principle of one that we think our business model allows us to get to ... the other issues are also around structure and done a lot to make sure that the structures that we've put in place actually aligning ... our employees very much with shareholders and deal with on the number things we've taken some of our toxic assets and actually given their employees in lieu compensation things like that ... we think that's probably struck with a good way to go as well ... no ... fair you know a fair amount of compensation deferred and slid into the firm's stock except rap ... so think if we can do those kinds of things and get that balance right between shareholders and employees I think that'll puts in a much better place in terms of this whole ... debate aam and again I think we probably ... made a lot of progress toward making that happen ... Craig ... final final question you still driving a Prius ... but you must CBOE was CCO robot drives a Prius out not stick my neck out you still underpriced Prius is running great and gets great gas mileage and it's the most of that you're right it's probably ... the only one I see around town groomed by IA by it